Liberty Property Trust chief information officer Steve Messaros spoke with CPE editorial director Suzann D. Silverman about the integrated, corporate-level approach the REIT has taken to its business strategies, and in particular how technology and real estate work together. The office and industrial property company introduced a scenario-planning strategy in 2007 in which it began considering and planning for possible futures, a process it revisited last year.

Q. What initiatives have come out of your review of your scenario-planning strategy?

A. We’ve got six major corporate-wide initiatives: We call them key success factors. These are competencies needing continuing investment to maintain competitive advantage in the series of possible futures that are out there, and pretty much all of them require attention from IT. The first is sustainability and sustaining—basically, improving the efficiency of our portfolio. … (It) spawned one of the first major projects where the IT department at Liberty got involved on the real estate side, developing a building wide area network (BWAN). …

Another is our ability to communicate in the organization—how we communicate and collaborate is a key factor for how we succeed, and IT plays a tremendous role in facilitating this. The third that requires IT investment and support is asset management: constantly improving our ability to manage our assets to produce the highest-possible returns in the long term. Along the same lines, operational efficiency is a key success factor for us; it is imperative that we operate efficiently as we grow, and IT plays a large role in this. Talent management—making sure we have the human capital we need—is another success factor. And finally, since the entire reason for our organization’s existence is to provide valuable real estate solutions—what we call extraordinary work environments—to corporate America, we need to be constantly in consultation with, learning from and educating a large number of tenant customers. This requires internal and external communication strategies and technological tools from us.

We truly have a crucial role to play in virtually every aspect of our company’s operations. This makes having an R&D function particularly important, and I think it could be a future key success factor. We are just starting to dip our toe in the R&D water, but I think that could be one that’s really important to get right very quickly.

Q. Are you striving, with what you’re putting in place, to make them more flexible so you can shift them as technology evolves further?

A. There’s a shift to try to push some of the control out to our customers. We’re beginning to see that in the BWAN phase II. I mean, you could look at a future scenario where real estate companies will still be leasing to companies and organizations, but we might also be getting into leasing by the seat. Trying to understand what that means and what level of control will be necessary to really succeed in that market would be an interesting thing. Now, that’s not something that’s going to happen overnight or even in the next few years, but that’s one of the things, at least in the back
of my mind, that we need to be prepared for.

Q. R&D relative to anything specific or at a broader level?

A. It’s both broad and specific. Significant technologies are all coming into vogue and down to the Main Street level very quickly—the combination of unified communications, 4G and cloud is incredibly significant and potentially will have a huge impact on the way we work … how (office buildings) will be built out, and what will succeed and not succeed in the future. So for me it’s much more about the technology. I mean, there’s always the market and the demographics, and there will always be a need, but is there something significantly going to change in the office area that we need to be aware of? I think there is, and the more armed we are with knowledge, the better off we’ll be and the better the decisions we’ll make today (for our) real estate.

Q. Are you striving, with what you’re putting in place, to make them more flexible so you can shift them as technology evolves further? Liberty Property Trust is considered one of the leaders in the sustainability movement among real estate investors and owners, and you mentioned it as one of your initiatives. What are you doing in regards to sustainability?

A. I think the BWAN project was a great example, where up ’til then our sustainability initiative was really limited to building LEED buildings—not an insubstantial investment, but it was really on the periphery. When you own a few billion dollars’ worth of real estate and you’re developing a few hundred million dollars’ worth every year, to really move the needle from a sustainability perspective on an enterprise basis, you have to look at how you improve your existing assets. It is a very, very tough process to go through each one of the buildings trying to understand (whether it) is an efficient building (or) an inefficient building (using) objective measurements. That’s where the BWAN—at least, the first phase of it—allowed us to run through the primary inventory of buildings … to make a determination of whether or not it’s an efficient building— should we invest further in that building or is that building so inefficient that it should be directed more to dispositions? …

From an efficiency perspective, we’re making sure that we’re not wasting tenants’ dollars: that the buildings, when they shouldn’t be running, are shut down. … That’s a big deal, and there are a lot of folks out there that still don’t do that. You can’t do it from your invoices and looking at your kilowatt usage based on an invoice that you might get from a utility company. You really need to look at your energy profile and understand what it means. … It’s certainly not a science; it’s much more of an art than I thought when I first went into this process. …

Phase II is a 10-building project where we’re testing and trying to understand what brings the best value. … Is it motion sensor lighting? Is it HVAC controls? … Is it daylight harvesting? Is it simply monitoring the energy profile for a building? Submetering the space for each individual tenant? What is it that drives and provides the best business case for investment? Because we’re trying to take that 10-building project and extrapolate those results across the rest of the portfolio, and we really need to understand … what gives us the quickest turnaround, what’s the best return on our investment.

Q. You said it’s more art than science. Do you see it ever becoming more of a science?

A. I think there are some technologies out there still in the formative stage, where you could begin to look at … just how many people come into the building, when do they come into the building, where do they go, how does the traffic move throughout a building—trying to understand how all of that fits into HVAC and lighting. Obviously, you can have lighting and you can have motion sensors, and that’s relatively simple, but the motion for one person versus 10 people versus 100 people. That’ll begin to scratch the surface of the kind of information that we’re going to need if we’re really going to have smart buildings.

Q. What types of capabilities do you now include on your IT team and how has that changed?

A. IT has always been a great resource to translate things. Typically, it’s trying to translate technology into business applications … and explain it to a seasoned business individual. The same thing holds true in building initiatives, where you’ve got people that are very comfortable talking about building automation systems and LON and BACnet, but that’s not a typical lexicon for an IT or technology individual.

We ended up going out to our property management group (in 2006) and pulling in a director of portfolio technology (Fred Dougherty) that was very, very well versed in building technologies but still had a lot to learn about IT. We embedded him in the IT group, so he was able to both teach us more about building technologies and learn some of the principles that we apply in IT and marry those two. And now, he’s a great bridge for discussions with the field when it comes to the individual property managers and being able to talk the property management talk while at the same time translating the technology piece.

Q. Do you see more real estate companies bringing in executives from outside IT to run the department?

A. I think you’re seeing a lot more heads of IT that don’t necessarily have a technology background, that come from the business. … My background is accounting, finance, and it’s not technology. Back in 2003, when I was put in charge of the IT function at Liberty, there were very, very few people that weren’t very technology oriented. Very, very bright people, but they didn’t necessarily know a whole lot about real estate; they knew a lot about technology. I think that pendulum is swinging to real estate first, technology second.

Q. CoreNet Global for a while has been pursuing a concept of integration in corporations of the real estate, IT and HR departments. How do you see those efforts being applied among real estate companies?

A. Tying together real estate and IT has been happening at Liberty for quite some time, but the combination of HR into that mix is something of relative recent development here. (About three years ago) we had a new (head of HR) brought in, a woman by the name of Caren Hosansky, who has really pushed the agenda of change management and how important that is to the ultimate success of a project. And managing expectations of all the different stakeholder groups and trying to understand what the motivations are behind each one of those stakeholders, because generally they’re all different.

Anytime there is uncertainty and an inability to make decisions, it negatively impacts every business, including real estate. Commercial real estate hiring saw a distinct falloff in July 2011, a typical precursor to an economic slowdown. Toward the end of 2011, there seemed to be signs of increased demand. Why the hiring uptick? Market sentiment suggested that the industry’s leadership is resigned to the fact that uncertainty is a reality and realized the necessity of making decisions in order to manage business.

In addition, all-time-low U.S. interest rates have made debt capital inexpensive, while immigration trends and increased home mortgage qualifications have made the multi-family business vibrant. The aging society bodes well for the healthcare sector. Increased use of IT to re- duce labor costs has improved opportunities in the data center sector. Sales of luxury consumer goods and services have rebounded. And non-profit employment is on track to replace civilian public-sector employment by 2014-2015, which bodes well for the office sector in geographies like Washington, D.C., while eGame, eBook, social networking and video streaming companies are driving office demand in high-technology hubs like Austin and the Bay Area.

A number of sectors do remain extremely troubled. Besides the single-family residential business, private developers are strapped, as are construction/engineering firms, with the possible exception of public firms doing business globally. With the slowdown in asset sales, brokerage firms are suffering. The real estate private equity firms are also challenged, and the CMBS business is shut down again; it will come back at some future point, but more modestly. The real estate investment banking business is predicted to be bumpy at best in 2012. The retail, industrial and office sectors are generally viewed to be episodic, and demand will only be driven by well- positioned firms in growth-oriented geographies.

Talent Upgrade

But many companies are hiring, recognizing that this is a good time to upgrade talent. Whenever market conditions are unstable and unvested equity is worthless, it makes sense to upgrade members of a firm’s senior leadership team, as it can be done more reasonably then.

The firms that are best positioned today are those that are well capitalized. While the REITs have been buffeted by the stock market’s volatility, they are poised to take advantage of market opportunities. Real estate investment managers (with the possible exception of private equity firms) will benefit from investors’ desire to work with fewer firms with broader capabilities, both from a geographic and asset-class perspective. Core investors in particular are deploying incremental capital on a conservative basis, and managers with a track record in that space are receiving additional allocations.

Among those actively hiring, the insurance companies and commercial banks are bringing in lenders and underwriters as they are overwhelmed by demand. Multi-family investment and development professionals are in demand, as are healthcare investment and asset management executives, while the hospitality sector is seeking acquisitions professionals. Service firms want professionals who can manage outsourced relationships with corporate America. And office owners in the gateway cities are seeking professionals who can manage and lease properties.

Among investment managers, capital raisers and portfolio managers are still in demand, and investment professionals are generally being recruited, with boots on the ground often considered critical to identifying purchases with attractive returns.

In addition, directors and board members are being actively recruited, as are CEOs, COOs and CFOs across all sectors, and global experience is becoming increasingly important as the world grows smaller.

Compensation: Fluctuating Rewards
By Jeremy Banoff, Senior Managing Director, FPL Associates L.P.

In light of the volatile real estate market, exacerbated by the wide variance in performance across the public and private real estate sectors and within each asset class and risk profile, this year’s expectations for compensation payouts vis-à-vis incentives, both cash and equity, are likewise expected to vary widely.

Public Real Estate Firms

Real estate executives are coming off of re- cord high levels of pay with respect to performance year 2010 (compensation typically paid or granted in early 2011 rewarding for the prior year’s performance), according to findings for FPL’s “Ninth Annual Top 100 Public Real Estate Compensation Analysis.” Expectations for this year are the widest we’ve seen in recent years, with projections ranging from a dip of 10 percent year-over-year to an increase of 10 percent, largely differentiated by expected firm performance, as noted in our exclusive “Compensation Pulse Survey—2011 Year End Bonus Expectations and 2012 Salary Projections.” This is not surprising, given the volatility that continues to confront the public markets.

The one constant since the downturn in 2008 has been three consecutive record years of equity capital raising. This has allowed companies to clean up their balance sheets and have a distinct advantage over many private companies.

With the market performing exceptionally well, retention is not nearly the concern it was just a couple of years ago. Equity awards granted since the market downturn have appreciated in light of such high levels of positive total return performance and have proven to be a valuable tool in retaining and attracting executives.

Consecutive years of outperformance have translated into incentives awarded above “target” levels. Such payouts are still largely anticipated for performance year 2011, as well, but their magnitude is likely to decline.

Private Real Estate Firms

Notwithstanding the fact that private companies vary widely in structure relating to both capital and risk, they are also expected to increase compensation for performance year 2011 by healthy levels. Pay that occurred for performance year 2010 increased by 10 to 25 percent, on average, and further increases in the low double digits are expected for performance year 2011. And according to FPL’s “Pulse Survey,” twice as many firms expect pay to increase versus decrease for performance year 2011.

However, increases are occurring on relatively low baselines, and with private real estate firms tending to lag their public counterparts by 12 to 18 months, payouts are still a year removed from levels not seen since the early part of the 2000s.

Interestingly, less risky firms that specialize in core/core-plus products tend to be performing better than higher-risk value-added and opportunistic products. As a result, the largest increases are expected in the real estate investment management space, not private equity firms.

Another impact comes from a “resetting” of fee structures that has slowly evolved in recent years. Asset management fees, which typically play a major role in funding cash bonus pools, are declining (not just the fee percentages but the capital raised), as are performance fees corresponding to long-term compensation levels. Longer-term expected fund returns are declining compared to the mid-2000s, as are performance fee structures, with managers receiving a lesser share of profits in many new instances.

Going forward, as noted in the most recent quarter of the “Real Estate Roundtable Sentiment Index,” conducted by FPL, the mood among public and private executives has changed, registering the lowest levels since late 2009. A majority of executives predict a decline in 2012, with very early indications suggesting the public side will not see material changes to compensation structures while the private side may continue to experience pressure.

Taken as a whole, 2011 was something of a tumultuous year: There was a rally in the summer when the economy looked to get back on track, then the events of the fall–after a debt crisis in Europe as well as re-rising unemployment and the Congressional debt debate domestically–slowed that train. Either way, it was an interesting time for commercial real estate. Here are our top 11 stories from 2011:

Highland Fairview Breaks Ground on Future Skechers Home
California Gov. Arnold Schwarzenegger presided over the groundbreaking of Highland Fairview Corporate Park in Rancho Belago, Calif., which developer Highland Fairview says will be the largest green building of its kind in the United States.

Revel Secures $1.2B for Stalled Casino Project
The entertainment firm has closed on a financing package for the 6.2 million-square-foot Revel Hotel and Casino in Atlantic City. Money issues brought most construction activity at the $2.4 billion beachfront entertainment resort to a halt in January 2009, leaving the project half finished.

Philadelphia’s High-Rise Drought Eased by 34-Story Apartment Project
The $104 million project would be the first high-rise in any property category to get underway in the city since the 2008 opening of Comcast Center.

Renaissance Man: As Starwood Capital Turns 20, Founder Barry Sternlicht Explores New Paths
If the commercial real estate industry held a decathlon for executives, Barry Sternlicht would be a serious threat to run off with the trophy, and not just because Starwood Capital Group’s chairman & CEO looks as fit as the tennis player he was at Brown University 30 years ago.

Behind PNC’s Acquisition of RBC Bank USA
RBC has been a major player in the commercial real estate lending sector, and the transaction will now add to PNC’s commercial real estate portfolio.

Facebook Leases New 1 MSF HQ
The nine-building campus, located at 1601 Willow Road about 30 miles south of San Francisco in San Mateo County, materialized over a two-year period commencing in 1993. Oracle came into possession of the asset in January 2010, when it officially completed its $7.4 billion buyout of Sun Microsystems.

Grubb & Ellis in Exclusive Talks with C-III Capital & Colony Capital
The service firm is getting a major infusion of capital from two new stakeholders in a move that could point to a sale or other large strategic investment.

Why Blackstone’s $1.1B Bet Goes Against the Grain
The Blackstone Group’s $1.1 billion acquisition last week of a suburban office portfolio from Duke Realty Corp. challenges conventional wisdom on multiple fronts–and departs from the standard approach of grabbing core office product in a handful of markets.

Health Care REIT Buys Genesis for $2.4B
The sales transaction frenzy in the healthcare real estate sector continues as JER Partners and Formation Capital sign on to sell the company, which comes to the table with a portfolio of 147 properties in 11 states.

CoStar Amps Up Offerings with LoopNet Acquisition
The deal comes as no surprise to those who keep an eye on the ins and outs of the industry. B. Riley & Co. director of research Ian Corydon said, “It has made sense for a long, long time.”

Fannie Mae Reveals Top Multi-Family Lenders
Performance hit a higher level in 2010, with each of the 10 lender partners each contributing a minimum of $870 million in loan volume, compared to 2009’s minimum of $700 million.

Emerging Trends crafters Jonathan Miller and Stephen Blank discuss this year’s findings with CPE TV during the ULI Fall Meeting.

Click on the following headlines for more on the Emerging Trends results:

ULI Special Report: Opportunities and Emerging Trends

Washington is Top Investor Choice Again as Tough 2012 Looms: PwC/ULI Survey

This year during the 2011 Convention & Marketplace, the Commercial Real Estate Women Network honored five women for extraordinary leadership contributions to the industry. Representing a variety of disciplines, these winners of the Impact Awards—and the top honor, the Achievement of Excellence Award—have orchestrated complex deals as pioneers, negotiators and mediators, while at the same time supporting colleagues and mentoring future leaders. Following is a video featuring their insights into leadership and business success, as well as an extended version of the write-ups on their experiences that first appeared in the November 2011 issue of Commercial Property Executive. For more on the awards themselves, log on to crewnetwork.org.

CPE TV Features: Interviews with the Award Winners

Achievement of Excellence Award/Entrepreneurial Spirit Award

Pamela Bundy Foster
President & CEO
Bundy Development Corp.

Pamela Bundy Foster did not set out to become a real estate developer, let alone partner on major mixed-use projects throughout Washington, D.C. But long before she founded her development company, she knew she never wanted to work for someone else.

Initially planning to become a psychologist, Foster realized it was not for her while doing doctoral work. The Hustle, Va., native instead went to work for 7-Eleven and then Pepsico as a district manager before realizing she had to take yet another direction.

Jobless but financially sound, having recently reorganized her priorities, she took a sales class and discovered real estate. “I knew I didn’t want real estate sales,” she said, so she became an appraiser. A client group with a mid-’90s approach to the Washington market gave her the idea of buying homes inexpensively, then building or renovating and selling them. Between 1995 and 1999, she averaged 10 to 12 houses per year, developing a blueprint for her company and incorporating as Pamela Bundy & Associates in 1996. She did not know much about development at the outset, but growing up in the lumber business had given her a sense of it and she hired people to fill the gaps in her own expertise. “I just wasn’t scared,” she said. “I was willing to learn the hard way, willing to get people to train me, to learn on the job.”

In 1999, she landed her first big deal, assembling a block of properties in Washington’s emerging Logan Circle submarket to develop The Castle, a $3.1 million, 13,000-square-foot condominium property, using ingenuity to win an audience with a tough property owner and distinguish herself. Bundy followed that project the next year with a second Logan Circle project, The Icon, a $5.2 million property that totaled 26,000 square feet. “I’m willing to explore neighborhoods other people wouldn’t,” she explained, naming NoMa as another early focus.

Those projects led to bigger deals, as developers like Lowe Enterprises, The JBG Cos. and Hines began inviting her to bring her condominium expertise to their mixed-use projects. Foster, however, had other plans. Though developers often wanted her to partner only on the condo portion of a project, “my business instincts tell me never to do that,” she declared. Instead, she insisted on a pari passu partnership, teaming with Hines on the $950 million CityCenterDC and Lowe Enterprises on the $220 million City Vista project. Another recent win: a five-year indefinite delivery/indefinite quantity construction management contract for the District of Columbia.

• Goals: Build a diversified real estate company, become an advisor in the company, develop staff members so they can take on more responsibility. “I’m clearly in the line of mentoring young talent—I see that as my biggest opportunity.”
• Greatest Challenges: Raising equity. Aligning principles or base values with people who invest in projects. “Deals work when everybody wins.” Her philosophy: If everyone doesn’t win, I don’t want to do the deal.
• Secrets to Her Success: A risk taker, not too afraid of anything. “And I don’t think I approach real estate in the traditional way.” Always prepared to walk away from deals, believes you should always have an option and be able to say, “Thanks, but no thanks.”
• Best Advice Received: Take your moment to cry, then get up and move on—and that doesn’t make you less of a businessperson. Never, never give up on yourself.
• Lessons Learned: Be prepared to walk away from deals. She didn’t have to model herself after large development firms to be successful.
• Advice to Women: Don’t be afraid to articulate your softer female views. “I don’t think I did enough of this.”
• Advice to Others in General: Do something each day that makes you scared. “I challenge myself every day.” Don’t be afraid to bring different perspective to the table.

Career Advancement for Women Award (Shared)

Char Fortune
Managing Director, Corporate Services
Grubb & Ellis Co.

Char Fortune has had plenty of experience as a leader in the real estate service business. Her 15 years in senior positions have included five years heading agency leasing and then corporate services groups for Trammell Crow Co. and six years running Southeast corporate services for Grubb & Ellis Co. Given these credentials, it should come as no surprise that she would launch a successful leadership program for CREW Atlanta that has graduated seven classes in the past 10 years.

“Women are smart and can do really well in this business, but there’s not a great critical mass and it’s hard to find people who are like you who can help you,” Fortune said in explaining the thinking behind the program’s creation. She and one-time colleague Lee Eastwood came up with the idea as a means to involve more CREW members in leadership, modeling Leadership CREW on comparable business programs. The year-long schedule is designed to enhance self-knowledge as a route to personal and professional advancement.

Last year, Fortune stepped back in to refocus the program. Working with Eastwood’s business partner, Christine Gorham, she introduced a personal strategic plan that helped attendees better shape their own strategies and goals.

Fortune broke into the real estate business right out of the starting gate. Graduating from West Virginia University with a degree in journalism, she went to work as a receptionist for a real estate developer and contractor in Raleigh. Knowing she aspired to do more, her boss gave her leasing responsibility for an office building and a retail strip center. During her 30-year career, she has been recruited to Cushman & Wakefield Inc., Beacon Properties Corp. and ARES Inc., with a stop at Internet service provider IntelliSpace Atlanta Inc. “My objective wherever I go is to make a difference, to move the needle,” she observed, adding, “You get back what you give out.”

• Goals: “My objective wherever I go is to make a difference, to move the needle.”
• Greatest Challenges: Competing for equal stature with men in the real estate industry.
• Secrets to Her Success: Always behaving as professionally as possible, always learning, always taking the high road, and giving back: “I’m always on that list of people to call.” Being a good listener and asking the right questions to learn about people and win them over.
• Best Advice Received: If you don’t have anything smart to say, don’t say anything at all (mother).
• Advice to Others: “You get back what you give out,” and your reputation is critical, so give your very best effort and always do the right thing. Plus, there are a lot of smart people out there—it’s how you set yourself apart that counts.

Lee Eastwood
President
Eastwood Real Estate Services L.L.C.

Healthcare real estate is attracting quite a following these days, but for Lee Eastwood it was a natural fit. A doctor’s daughter, she started her real estate career in 1978 by leasing office buildings, but her focus took a turn in 1989, when Kaiser Permanente sought to open its first location in Atlanta. She was then working for Faison and representing the Lakeside Office Park, where she saw an open space as ideal for the healthcare provider. It took nine months, but she got the lease signed.

That deal led to others and ultimately a full-time focus on healthcare overseeing Cousins Properties’ 1 million-square-foot medical office building portfolio. After four years in that capacity, she started her own company. With Taylor & Mathis, Faison (bought by Trammell Crow Co.) and ARES Inc. on her resume, “there wasn’t anybody else I wanted to work for,” she explained. Furthermore, she was receiving inquiries from the tenant side.

To date, Eastwood has leased about 5 million square feet, representing both tenants and landlords, including Emory Healthcare, Grady Health System, Kaiser, Northside Hospital System and Saint Joseph’s Hospital. Last year, she brought in a partner: Christine Gorham, a 21-year veteran of medical operations.

Eastwood discovered real estate through a temporary job pursuing leads for a broker, earning a real estate license to do so. When she showed a client space at Perimeter Center, she wound up with a job offer from Taylor & Mathis.

Eastwood taught herself the business but has played an active role in helping other women progress in real estate. While head of the CREW Atlanta leadership committee, charged with trying to involve more members in Leadership Buckhead activities, she and one-time boss Char Fortune instead founded a new program, Leadership CREW, which launched in January 2000 with a class of 21 women and has since graduated six more classes.

• Goals: Keep on working to make clients happy. Write a book about medical office leasing and give seminars on the topic. Continue to expand her business.
• Greatest Challenges: In the early days, sexual harassment and wage disparity.
• Best Advice Received: Fake it ‘til you make it (Annette Meyer, former CREW Atlanta president). People love to talk about themselves (mother). If you get, give; if you learn, teach (Maya Angelou).
• Advice to Others: Your reputation is all you have; do whatever is necessary to keep it. It is not what you know but who you know; seek out those who can teach you and will support you. You have to be nice to people, work hard and put your ego aside.

Economic Improvement Award

Irene MacDougall
Partner
Tucker Ellis & West L.L.P.

Reaching an agreement on financing a 24-acre mixed-use project is no easy task, especially when it involves more than 33 public and private lenders. But Irene MacDougall achieved just that between 2007 and 2010 while coordinating the financing on the Flats East Bank project in Cleveland. “It was really very much a balancing act,” she recalled.

MacDougall brings a rare combination of skills to her focus on real estate and finance law. While she has learned finance on the job, she acquired her interest in real estate early on. The daughter of a civil engineer, she spent Sundays while growing up going on house tours, and she worked part time for a title agency while earning a political science degree and starting law studies at Case Western Reserve University.

A partner in Tucker Ellis & West L.L.P.’s Cleveland office for four and a half years, MacDougall took on a considerable challenge with the Flats East Bank project, a partnership of the Wolstein family and Fairmount Properties. Financing was scheduled to close in December 2008 but stalled when the capital markets collapsed; it included a collateral sharing arrangement among  multiple public lenders and a tax increment financing district that underwent repeated revisions, with 19 versions of the TIF document alone and some 30 versions of the collateral agreement for disbursement for development.

But MacDougall thrives on such complex deals. She also worked on financing for the expansion of the Louis Stokes Cleveland Department of Veterans Affairs Medical Center, which closed at the end of 2009.

MacDougall, the mother of four, including triplets, likes deals where she needs to align entities’ priorities and individuals’ personalities rather than the traditional attorney’s role of holding the line for the client. “I’m able to bridge the gap for everyone (on large, complex transactions and) bring some more cooperative spirit,” she observed.

• Goals: Continue to work on more complex public-private developments, which provide a necessary synergy.
• Greatest Challenges: As a woman, being taken seriously in business: There aren’t many women in the position of running projects, “pulling it all together.”
• Secrets to Her Success: Treating everyone with respect.
• Best Advice Received: “You have to be your own nurturing parent” (former partner).
• Advice to Others: We all succeed when we work together, and that’s easier said than done.

Member-to-Member Business Award

Cindy Wolfe
Executive Vice President
Bank of the Ozarks

Despite the recession, Cindy Wolfe has kept busy—and has made sure fellow CREW Charlotte members have, too. When she provided construction financing on a 300-unit apartment complex in Greensboro, N.C., her mortgage broker and lender’s counsel were CREW associates. Her 40-odd distressed property deals have provided work for CREW-affiliated attorneys. And when her expanding team moved into new office space, she turned to fellow CREW members for office furniture, interior design and signage. With a new office on the way, CREW members will have the opportunity to bid on more work.

Wolfe returned to Charlotte to open a loan production office there for Bank of the Ozarks in 2001 and in the ensuing decade has added three other lenders and two loan assistants, increasing business and establishing a name in the commercial real estate market. The office move was an interim step while the bank builds a new, 10,000-square-foot property. A new branch business will further expand the bank; it acquired Woodlands Bank’s assets from the FDIC last year.

Wolfe expects to have plenty more work for her CREW colleagues, thanks to her philosophy to “live and breathe” her job—which she says does not prevent a balanced life. The mother of two boys is on the board of her district Girl Scout council and chair of the property committee, on the alumni board of Queens University of Charlotte, and active with the Charlotte Rotary and CREW Charlotte, for which she was president in 2009.

Wolfe got her start in information technology and project management at First Union Bank in Little Rock, Ark., in 1988. In the mid-’90s, she returned to school to study banking, then entered real estate finance with Boatmen’s Bank, now part of Bank of America. In 1998, she landed at Bank of the Ozarks. Now she just hopes for more market challenges. “That’s when you really make a name for yourself,” she said.

• Goals: To be the best bank in Charlotte.
• Greatest Challenges: This economy and the competition for deals: “It’s challenging to compete for deals, and it’s what I love about my job.”
• Secrets to Her Success: Never having a delineation between work hours and off hours (while at the same time having a life and a family).
• Best Advice Received: You need to live it and breathe it to be successful (Jean Arehart, director with Bank of the Ozarks).
• Advice to Others: “You just have to live and breathe it.” Also, get every piece of education you can, get a CCIM designation, then just get out there and learn and do as much as you can and meet everybody you can. And always take the most difficult deals—particularly the ones on which other people have fumbled the ball.

Read Impactful Women for more words of wisdom from these successful women, plus profiles of their achievements.

In the 20 years since he founded Starwood Capital Group L.L.C., Barry Sternlicht has built a big name for himself, both as a hotelier and as a private real estate investor. Reflecting on his experience building Starwood Hotels & Resorts Worldwide Inc. into a hotel juggernaut and then launching Starwood Property Trust, he offered his own lessons learned and his predictions for emergence from the economic crisis during a one-on-one interview session at the NYU Schack School of Real Estate’s Capital Markets conference on Thursday.

Interviewer James Kuhn, longtime president of Newmark Knight Frank and himself an industry veteran, started with branding, an area Sternlicht commandeered during his days leading Starwood Hotels & Resorts Worldwide. Today, the chairman & CEO of Starwood Capital believes branding is both “over-rated and under-rated in real estate” – and much easier to achieve than it ever was, thanks to the greater availability of word of mouth.

That capability traces back to the Internet, and in particular social media, which he believes is far too underutilized by the real estate industry. In Brazil, he noted, some real estate companies are selling their properties entirely online.

Sternlicht learned his first business tenet early on, when he went to work for Neil Bluhm. “I learned there are no secrets – just hard work,” he said. He applied that when Starwood purchased the Westin and Sheraton brands in 1998 and incorporated it into what then became one of the world’s largest hotel companies. There was no luck involved in the purchase and development of that brand, he noted – “we knew exactly what we were doing.”

Another lesson he picked up, from a finance professor, was “Find the freight trains in your life and get on them instead of in front of them.” Europe may be one such freight train. While Sternlicht sees opportunities there, he warned that it may still be far too early to step in, there being a 25 percent chance that the world or at least Europe could collapse, he warned. And the banks are difficult to track to their origins: “You have no idea where these jellyfish go.”

On the other hand, in July he made his first big investment in Brazil, purchasing a 33.3 percent stake in warehouse manager MRV Log for $159 million, and he has confidence in China’s ability to succeed with its investments, although he admitted that given the lack of market research in this “company masquerading as a country,” it is difficult to understand how the real estate gets filled up.

In general, he has altered his strategy for the market, sticking to larger investments but with wider (and lower) return expectations. “What there isn’t to do is make five times your capital,” he commented, blaming the politicians for the lack of recovery.

His final lessons from Bluhm: The flow of funds overwhelms fundamentals. And people want to be in New York City.

On a typical weekday, it takes about half an hour by subway and shoe leather to travel from the MetLife Building in Midtown Manhattan four miles south to the World Financial Center near the island’s southern tip. For Mitch Rudin, that routine trip recently took on added significance. In June, after 21 years as a top executive at CBRE Group Inc. and its predecessors, Rudin packed up his office at the MetLife Building and exchanged fond farewells with his longtime colleagues. His next stop was the 7.7 million-square-foot World Financial Center complex, where he took up new duties as president & CEO of Brookfield Office Properties Inc.’s U.S. operations. In that new capacity, Rudin is charged with strategic oversight of a 50 million-square-foot national portfolio of trophy towers as Brookfield looks ahead to significant development and acquisitions.

Rudin is well aware of what he left behind in making the move from service firm to REIT: “I was coming up on my 22nd year with a company that meant a lot to me,” he said. Nevertheless, he explained, he saw an opportunity to take on fresh challenges for “another industry leader with a very strong culture, populated by outstanding people.” Despite the ostensible differences between the two industry giants, that similarity quickly gave Rudin a sense of both belonging and ownership. As he sees it, the move to Brookfield also represents the best of two worlds. On one hand, returning to a national role for the first time since 2004 offers an invigorating change of pace. At the same time, given Brookfield’s 19 million-square-foot Manhattan holdings and big development pipeline, Rudin will also be devoting plenty of attention to his favorite city.

In a sense, Rudin’s move brings him full circle, marking a return to the owner’s side of the table; he began his real estate career in 1985 with Tishman Speyer. “I actually think this pulls together the strands of his full career,” said Mary Ann Tighe, CEO of CBRE’s tri-state region.

Rudin’s two decades at CBRE and its predecessors, Insignia/ESG Inc. and the Edward S. Gordon Co., represent uncommon continuity. Nevertheless, he points out that his work has also been repeatedly refreshed by variety and change, an assertion borne out by a quick career overview. Since joining the Edward S. Gordon Co. in 1989, Rudin has arranged countless complex transactions, overseen a national brokerage practice, managed the day-to-day operations of CBRE’s biggest office, launched a successful owner service business, worked on post-merger transitions, recruited professionals around the United States and helped craft a coast-to-coast expansion strategy.

Rudin’s appointment coincided with several other executive promotions and strategic moves at Brookfield. His predecessor, Dennis Friedrich, was named the company’s global chief investment offi cer and will advise the company’s CEO, Ric Clark. At the same time, Tom Farley was promoted to president & global COO, taking on asset management, leasing and operations responsibility for Brookfield’s holdings in Canada, Australia and the United Kingdom. And Jan Sucharda was promoted to president & CEO of Canadian commercial operations at Brookfield Office Properties and Brookfield Office Properties Canada.

No less significant, Rudin’s arrival at Brookfield coincided with the completion of a major reorganization. A complex series of transactions completed last spring transformed Brookfield Office into a pure-play office developer and owner. The linchpin was the spinoff of Brookfield Office Properties’ residential business, which was then merged with Brookfield Homes Corp. to form a new affiliate, Brookfield Residential. Besides achieving greater efficiencies, the reorganization is intended to send the market a message. In proportion to its stature as a multinational investor and developer, Rudin observed, Brookfield Office tends to maintain a relatively low profile. “Our identity might not be as apparent as some of the other companies in our sector,” he said. Turning the relatively low-key REIT into a pure-play office specialist, he said, allows Brookfield “to be identified as what we are.”

If some telling 2011 transactions are any barometer, the newly streamlined company is in for a vigorous few years under Rudin’s leadership. In September, the company added its 30th property in the Greater Washington, D.C., market: Three Bethesda Metro Center, a 368,000-square-foot, Class A office tower in Bethesda, Md. Brookfield paid The Meridian Group $150 million for the property, which is located across the street from another Brookfield asset, the three-building, 336,000-square-foot Bethesda Center complex. Rudin also expects Brookfield to continue selective dispositions. One recent deal, already in the pipeline by the time Rudin arrived, was the $340 million sale of 1400 Smith St. in Houston to Chevron, which has been the building’s sole tenant since 2007. Brookfield paid $120 million in 2006 for the then-vacant, 1.3 million-square-foot, 50-story tower and former headquarters of Enron and leased it to Chevron.

Over the next several years, Brookfield will focus its attention on selectively expanding its footprint in its current markets through acquisition and expansion, as well as working to maintain robust occupancy levels. Its top three markets by square footage today are New York City (20.2 million square feet in 12 properties), Houston (9.7 million in nine properties) and Washington, D.C. (7.6 million in 30 properties). The firm also owns smaller portfolios ranging in size from 543,000 to 4.5 million square feet in Los Angeles/Long Beach, Minneapolis, Boston, Denver and San Francisco.

Even where its total holdings are relatively small, Brookfield is typically represented by high-profile assets. In Denver, for example, the firm owns Republic Plaza, a 1.2 million-square-foot office tower that is also the city’s tallest building at 56 stories and 714 feet. Although Brookfield’s current markets will draw most of the activity, the company is open to establishing beachheads in attractive new markets like Seattle. As a result of carefully managing its resources, Brookfield has come through the recession with a strong balance sheet and deep resources in the real estate capital markets. Those tools will offer a leg up on the competition, Rudin contends: “Not everyone has the fi nancial or deal structure expertise to capture that type of product.”

Besides pursuing acquisition opportunities, Brookfield is seeking to grow through development. This winter, it will start work on a two-year, $250 million makeover of the retail portion of the World Financial Center. That effort will revitalize the two-decade-old retail section with a lineup of stores as well as a fresh look. Westfield Group and the Port Authority of New York and New Jersey are collaborating on the development of the retail component next door at the World Trade Center, but Rudin regards the two retail spaces as more complementary than competitive: “What’s good for us is good for them. What’s good for them is what’s good for us.”

Even the World Financial Center renovation is modest in scale compared to another Manhattan project. Early next year, it intends to break ground on Manhattan West, a 5.5 million-square-foot mixed-use project located between Ninth and Tenth Avenues and 31st and 33rd Streets in Midtown Manhattan. At full build-out, Manhattan West will encompass three trophy towers separated by a public plaza. For Rudin, the prospect of working on the complex, high-profile project from the ground up was one of the principal attractions of joining Brookfield. “To be part of shaping the city that you love is really terrific,” Rudin explained.

Rudin has arrived at his latest milestone as part of a career marked by both continuity and change. He took an indirect route to the real estate business, beginning his career as a real estate lawyer with the Manhattan office of Davis & Gilbert. During a seven-year tour of duty there, Rudin developed a practice that involved representing tenants in leasing situations. An early turning point in Rudin’s career occurred while he was representing a tenant in a building owned by Tishman Speyer. Impressed, the company invited him to join its development team. What followed was “a five-month period of soul-searching,” Rudin said, as he weighed whether to step away from a satisfying law practice. “Ultimately, I decided to do it, feeling that if it didn’t work out, learning the financial, operational and physical parts of real estate would only make me that much better as a lawyer.”

As a partner at Tishman Speyer, Rudin was responsible for leasing some 2 million square feet of office space. While there, he came to the attention of Edward Gordon, founder of the namesake firm, and Martin Turchin, then executive vice president. The two invited Rudin to join the company, then a leading commercial real estate services firm in the New York City metropolitan area. Rudin started out in the company’s consulting group, where he brought his understanding of finance and deal structure to transactions. But his entrepreneurial skills soon came to the fore. Among other accomplishments, he successfully lobbied to establish an owners’ representation group at the company. He led the practice, dubbed Gordon Property Group, from 1992 to 1996.

Other highlights of his tenure at ESG included overseeing the turnaround of One New York Plaza, a 2.6 million-square-foot office tower in Downtown Manhattan. Now a part of the Brookfield portfolio, the property was then owned by Chase Manhattan Bank. To counteract falling occupancy and declining physical condition, Rudin oversaw a four-year, $100 million makeover of the building. As a result of the improvement, Rudin and his team were able to land blue-chip tenants: Prudential Securities, which took 1 million square feet in 1992, and Goldman, Sachs & Co., which leased 420,000 square feet two years later.

By 1996, Rudin and his colleagues had built Gordon Property Group’s portfolio to 23 million square feet. The next watershed in Rudin’s career came in 1996, when Insignia Financial Group acquired the Edward S. Gordon Co.—by then, the nation’s fourth-largest commercial real estate services firm—in a $74 million deal. The merger brought Rudin together with Insignia/ESG’s then-CEO, Steve Siegel, a family friend who has known Rudin for some 40 years. In 1997, he was promoted to executive vice president of U.S. brokerage services, working closely with Siegel in leading the national expansion of Insignia/ESG’s footprint. One of Rudin’s first major assignments was to collaborate with Siegel on developing a five-year global expansion plan. “As much as I liked doing real estate transactions, I liked building things (even) better,” Rudin recalled. Rudin would typically identify a handful of top brokers in a market Insignia/ESG was eyeing, and Siegel would join him to seal the deal. Using lingo from the golf course, Siegel explained, “He would set tee for me to come in and swing at the ball.”

In 1999, Rudin was promoted to president of Insignia/ESG’s national brokerage services. He stayed on in that role for five years, a period that included one of the decade’s blockbuster mergers. In 2003, CB Richard Ellis Inc. acquired Insignia/ ESG for $415 million, a merger that vaulted CB Richard Ellis to the top ranks of the crucial New York City metropolitan market. Rudin was instrumental in shaping the newly merged entity as a member of the transition team. He traveled the country with Brett White, then the firm’s president (now CEO), to visit the offices of the newly combined firms. Where both firms were represented in a market, Rudin was charged with making the difficult recommendation of which professionals to keep on board.

Rudin enjoyed his work on strategy and recruiting, but the constant travel came to be grueling at times. He ran the national brokerage practice for 18 months after CB Richard Ellis completed the Insignia/ESG deal, then accepted an opportunity to stay closer to home, in 2004 being named president of the New York tri-state regional office, reporting directly to the region’s CEO, Mary Ann Tighe. Rudin took on day-to-day operating responsibility for a wide geographic area that encompassed New York City, Northern and Central New Jersey, Long Island, Westchester County, N.Y., and Fairfield County, Conn. Later, he was promoted to the office’s co-CEO.

The move proved to be a winner all around: Rudin was able to take on a new executive role close to home. Tighe and the region’s co-chairmen, John Powers and Robert Alexander, who had been stretched thin, were able to spend more of their time on transactions and business development. Not surprisingly, the region’s operating margin improved. Tighe, who led the team that represented Conde Nast in the media giant’s landmark 1 million-square-foot, 25-year lease at One World Trade Center, readily acknowledges Rudin’s contributions. “I never could have done the Conde Nast deal if Mitch hadn’t assumed half my job,” she observed. When it was disclosed last June, the deal was hailed as proof that the World Trade Center’s new office towers were commercially viable.

Rudin and Tighe also demonstrated the value of their teamwork during the negotiations for the firm’s regional headquarters offi ce. In early 2009, more than two years before expiration of the firm’s lease at 200 Park Ave., Tighe approached Rudin with a detailed plan that covered the benefits of relocating within the building and the structure of the lease terms. Rudin quickly bought into the strategy, although both executives realized that the plan would likely encounter challenges. In an office packed with accomplished, opinionated brokers, any strategy involving the firm’s plans for its own space would inevitably ruffle feathers. Rudin’s response, according to Tighe: “I’ll take care of that.” In late 2009, the firm signed a 15-year lease for 125,000 square feet. When the transition is complete next year, CBRE will leave its current digs on the 17th and 18th floors, keep its space on the 19th floor and expand to the 20th, 21st and 22nd floors. A redesign is in the works that will add double-height ceilings and outdoor terraces on the 21st floor.

During his long career, Rudin has earned a reputation not only for business acumen but also integrity. A few years ago, a major real estate company and the fee owner of a Manhattan property initiated a discussion about a rent recalibration. Negotiations had continued for some time without an agreement, explained Jonathan Mechanic, a longtime Rudin friend and chairman of the real estate department at Fried Frank Harris Jacobson & Shriver L.L.P., the law firm representing the tenant in the negotiations. In a bid to avoid arbitration, the parties agreed to bring in a mediator. Whoever came in to guide the delicate discussions, both sides knew, would have to be not only an experienced hand but also a person of unquestioned integrity. “Both sides mentioned Mitchell as someone they could trust,” Mechanic explained. “I don’t think there’s anybody who has a bad word to say about Mitchell. His word is his bond.”

Besides his reputation for probity, Rudin is known as a leader who keeps a steady hand on the wheel in good times and bad. That trademark unflappability, in fact, has been the subject of some affectionate teasing. Siegel recalled that on one occasion, when Rudin was receiving an award, his sons stepped to the podium to offer a few words in tribute and promised in mock earnest to give the audience a guide to discerning their father’s various moods. As they ticked off each state of mind—happy, sad, angry, worried and so on—the boys displayed the identical calm expression.

Unflappable he may be, but Rudin is a keen competitor on and off the job. Colleagues invariably describe him as a formidable athlete who enjoys golf, water sports and most of all, basketball. Rudin is a three-time member of the U.S. masters’ basketball team at the Maccabiah Games in Israel. On one occasion, he even played in the games at the same time as his son Ben was representing the United States on a junior squad. Tighe suggests that Rudin’s approach on the basketball court mirrors his best qualities as an executive—the adaptability to either lead the team or contribute as a strong role player. “As a leader and as a member of the team, you get the ball in the hands of the person most likely to achieve the basket,” Tighe noted.

Maybe that is why Rudin’s new leadership role at Brookfield comes as naturally as one of his patented jump shots.

While respondents to this year’s Emerging Trends poll took a somewhat pessimistic view of the market, panelists commenting on those results at the ULI Fall Meeting on Thursday took a less negative stance. In fact, Michael Covarrubias, chairman & CEO of TMG Partners, stated outright that he felt the respondents were more pessimistic than they should be. And all of the panelists see opportunities for investment, although most of them did not agree on the best point of focus.

For Covarrubias, property rehabs are a good place to focus, while David Lynn, managing director of Clarion Partners, named recapitalization his favored investment target and Diana Reid, executive vice president of PNC Real Estate, selected opportunities in infill, walkable cities. Survey researchers participating in the panel discussion offered their own views: Jonathan Miller, partner in Miller Ryan L.L.C. and author of the study for the past 20 years, named apartments as the place to invest, while ULI senior fellow Stephen Blank listed properties with “upside-down financial structures” and PricewaterhouseCoopers director Charles DiRocco said he likes land.

The presentation of results and panel discussion, moderated by Bentall Kennedy executive vice president Douglas Poutasse, followed a media presentation on Wednesday during which Miller, Blank and DiRocco pointed out some key findings of the study. Among them: “Don’t let the availability of capital cloud judgments” and “when there’s too much capital, there are always issues.” Perhaps most importantly, “recovery is slow.” Blank noted that while real estate looks like a good play because of its classic spreads over Treasuries, fundamentals could start to react to the difficult economy, leading to stagnating rents. And the study authors agreed that transaction activity will remain restrained, as prices and values get ahead of themselves and ahead of leasing and rental rates.

Even the relatively solid apartment market is seeing “very rich” pricing, Blank noted, and developers have to compete with older properties. Meanwhile, respondents expect a continued shortage of capital to finance the deals that do surface, with the CMBS market still slow to return, banks still focused on their “extend and pretend” practice and insurance companies sticking to high-profile deals and markets.

Warned Blank: Investors would be wise to follow the money, and when it looks out of control, retreat.

REITs are currently in the strongest position relative to other investors, pension funds will be disappointed as they strive to achieve necessary asset allocations and foreign investors are finding the United States favorable to their own backyards.

Most of the capital in the past year has flowed into what Emerging Trends has termed the “wealth islands,” including the long-popular 24-hour gateways, energy and technology markets, and the apartment sector. Apartments remain the most attractive property area, with even Class C making sense today, since it can be upgraded. “Spend a little more, hold a little longer and demand will be there,” DiRocco advised. Industrial markets will be most influenced by the new Panamax lock and larger, deeper-water ships—something to watch.

Summed up DiRocco: “Things are getting better, but there’s still going to be that long, hard grind.”

Watch a discussion of the results by report authors Jonathan Miller and Stephen Blank on CPE TV.

Prudential Mortgage Capital Co. is bringing a former Freddie Mac executive on board. The latest in a string of departures from the government-sponsored enterprises as the entities await congressional progress on determining their future structure, Michael McRoberts, who had served as vice president & national head of sales and production with Freddie, will spearhead Prudential’s Fannie Mae and Freddie Mac lending business as managing director.

The job seems a natural fit for McRoberts. At Freddie Mac, his home for two decades, he oversaw the lender’s conventional multi-family business and structured transactions as well as managing the seniors housing teams, the national Freddie Mac Program Plus network and four regional production offices. In his new role at Prudential, McRoberts will be responsible for the market-rate Fannie Mae and Freddie Mac portfolio teams and agency production team.

“Mike is an industry leader respected for his deep and broad knowledge of multi-family finance that will be a catalyst for continued growth in our already strong agency lending platform,” David Durning, senior managing director of Prudential Mortgage, noted in a prepared statement. “The last few years have brought tremendous change for all participants in the agency lending business. Adding Mike to Prudential Mortgage Capital’s leadership team highlights our strong commitment to agency lending.”

In addition to his long history with Freddie Mac, where he also once held the position of national head of underwriting and credit for the lender’s multi-family division, McRoberts brings to the table industry experience garnered from his time with First Maryland Mortgage Corp. and First Interstate Mortgage Corp. He will officially join Prudential on Dec. 5.

The departures from the GSEs are producing significant concern among real estate’s financiers, who worry that by the time a decision is made regarding changes to their structures, they will have lost the key talent and relationships that have produced so many successful deals. Others who have bid adieu to positions with Freddie Mac and Fannie Mae since severe financial troubles prompted the government to seize control of the GSEs in 2008. Recent departures have included Michael May, longtime head of multi-family at Freddie Mac; Frank Lutz, vice president for customer management in Fannie Mae’s northeast business center and head of secondary markets; Mitch Kiffe, Freddie Mac’s head of multi-family loan production; and Phil Weber, who headed Fannie Mae’s multi-family business.

For more on the GSE brain drain, including commentary from industry heavyhitters Eduardo Padilla, Shekar Narasimhan and Richard Green, click here to access CPE’s Special Focus: Changes at the GSEs.